Mumbai, June 10, 2018: The reporting requirements for financial institutions in India are magnified by the existence of multiple regulators such as the Reserve Bank of India, Securities Exchange Board of India, Ministry of Finance and Insurance Regulatory and Development Authority of India. This has disparate impacts on financial markets, products and functions. Further, the rising fraud menace in the Indian banking sector is expected to lead to enhanced stringent regulatory measures and reporting requirements.
According to PwC’s report “Deriving an upper edge through risk and finance alignment”, there needs to be a significant industry shift towards greater alignment between the risk and finance functions. In a survey conducted by PwC among global financial institutions last year, 66% of respondents identified regulatory demands as the primary driver for increased alignment between risk and finance, with few placing priority on enhanced business decision making and internal reporting.
Since most global financial institutions’ risk and regulatory practices are rolled out globally, this is a significant statistic for India as well. The survey also indicated that approximately 25% of respondents stated there was no defined vision for alignment, with the remainder acknowledging either a very preliminary or only a moderate definition of the vision. Despite being part of the conversation for several years, there are many reasons banks have still not better coordinated these two functions.
“In most institutions, the risk and finance functions have evolved separately, and largely exist in their own silos with distinct data definitions, operating models, and technology. Not only do these historic divisions between the two functions result in higher operational costs due to duplicative activities, but they also force management to stitch together pieces from each function to produce an integrated view of the business,” said Kuntal Sur, Partner & Leader – Financial Risk & Regulatory Services, PwC India.
These are the key drivers to enhanced reporting:
At the end of the day, financial institutions need quick access to accurate and actionable information to support reporting to regulators and business decisions. It is our view that executives should undertake a formal assessment of howrisk and finance should operate in their organisations in the future. There are several ways for the chief risk officer (CRO) and chief financial officer (CFO) to coordinate efforts in order to reduce or eliminate redundancy across their two functions while improving quality. We call this risk and finance alignment.
About the survey
PwC conducted 85 interviews or questionnaires spanning 30 institutions globally. Survey respondents were from Risk, Finance and Operations functions of global financial institutions. Some respondents may not have answered every question.
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